Do You Need Professional Representation for an IRS Audit?

When going through the mail you see an envelope with the return address of the Internal Revenue Service (IRS), your heart sinks and you begin to panic as you realize you have been selected for audit.  Remember, you have taxpayer rights which include the right to representation. In the Taxpayer Bill of Rights, #9, The Right to Retain Representation states that you may select a Certified Public Accountant (CPA), Enrolled Agent (EA), or attorney to represent you with the IRS. Interviews can be scheduled, or if already in progress, suspended and rescheduled with your representative.

In order to determine if you need a representative or not, you should consider the complexity of the issue.  The answer to this may lie in the type of audit being conducted. There are generally three types of IRS audits, and depending on the type, you may need representation by, or at the very least, consultation with a professional.

TYPES OF IRS AUDITS:

1. Correspondence –This type of audit is when the IRS has one or two questions on the return.  Usually, in this type of audit, they ask for documentation to be mailed in. If it is a simple issue and you have the documentation, you may choose to handle it on your own.  Be mindful of the due dates and use Certified Mail Return Receipt Requested delivery.  If you are lacking documentation or there is a complicated issue, you should consider consulting with a professional to determine if you need to have outside representation.
2. Desk – This type of audit is when there are enough problems or concerns on your return that you have been assigned to a revenue agent. The agent requests that you come to their office with your documentation for an interview.  You may want to consult with a professional and consider hiring representation, especially if there are any known issues with your return.
3. Field – This type of audit is when there are some major problems or concerns on your return.  You have been assigned to an experienced agent who expects to conduct the audit at your home or business to uncover all issues with your return, as well as review your surroundings, to make a determination if you reported all your income.  We highly recommend you hire representation for this type of audit.  The audit will then take place at the professional’s office instead of your own.

ADDITIONAL REASONS YOU MAY WANT TO HIRE A PROFESSIONAL TO REPRESENT YOU IN AN AUDIT INCLUDE:  

1. If you are unable to prepare the information. A professional can help you organize your documentation or strategize if you are missing the requested items.  A professional can also review your return for deductions you may have missed.
2. If you are uncomfortable. Once the audit door is open, it is open all the way. You do not get a do-over and you don’t want to encourage the expansion of the audit. By hiring professional representation, you have a buffer – someone to communicate on your behalf.  A professional offers guidance and helps formulate your responses to the auditor’s questions.  
3. If you can’t treat the auditor as a professional and with common courtesy. Many people have an aversion to auditors. However, auditors are professionals, doing their job. Therefore, despite your feelings about being audited, it would be in your best interest to treat the auditor with respect.  You want your audit to go well, and this is the first step in the right direction.  If you simply can’t do this, then consider hiring a professional.
4. If you don’t want the auditor in your home or office. Upon hiring representation, the field audit is rescheduled at your professional’s place of business. The auditor most likely will still be required to tour your business with your professional, but they will no longer have extended access to your location, staff, and customers.
5. If you are simply too busy. Your representative will handle all communication; therefore, you will have fewer interruptions.
6. If you want someone that knows your rights and can stand up for you.

Remember, if you decide to go it alone, at any time you can stop and request representation, especially if the audit is turning into a lifestyle audit or if the auditor is suddenly becoming interested in other issues. If you decide to hire a professional, be sure to find someone with extensive experience in dealing with the IRS.

At ADKF we have a Department of Tax Controversy dedicated to handling audits and other IRS issues.  Please call us at 210-829-1300, to learn more about our services or to schedule a consultation.